Today's Headlines

Bloomberg:

• Brazil Real Heads for Fourth Monthly Decline as Deficit Widens. Brazil’s real was headed for a fourth straight monthly decline as part of a broad drop in emerging-market currencies after the government’s budget deficit widened in December to almost the widest since 2009. The currency depreciated 2 percent to 2.4092 per U.S. dollar in January as of 3:09 p.m. in Sao Paulo and was little changed for the day. Swap rates on contracts maturing in January 2015 rose three basis points, or 0.03 percentage point, to 11.66 percent, extending their increase this month to 108 basis points, the most since the global financial crisis in 2008. 

• Argentine Bonds Plunge Most in Emerging Markets on Outflows. Argentine dollar bonds tumbled the most in emerging markets on concern government measures from devaluation to rate increases aren’t enough to improve the country’s deteriorating debt payment capacity. Argentine government dollar bonds due 2015 fell 3.88 cents on the dollar to 85.75 cents, driving yields up to 19.12 percent, the highest since June 2012. The extra yield investors demand to own Argentine bonds over U.S. Treasuries widened 75 basis points to 1,142 basis points, while the average spread on emerging-market bonds rose 11 basis points at 10:28 a.m. in New York, according to JPMorgan Chase & Co.’s EMBIG index. 

• Asian Currencies Drop in Week on China Slowdown Signs, Fed Taper. Asian currencies declined for a third week, led by the Thai baht and Malaysia’s ringgit, amid concern a slowdown in China and U.S. stimulus cuts will deepen the selloff in emerging markets. The Bloomberg JPMorgan-Asia Dollar Index (ADXY) fell 0.1 percent this week as a report signaled China’s manufacturing contracted for the first time in six months. The Federal Reserve said Jan. 29 it will pare its monthly bond purchases by $10 billion to $65 billion from February, following a similar reduction in January. The baht had its worst week in almost a month after global funds pulled money from the nation’s assets amid concern a Feb. 2 election will trigger more violence.

• European Banks Face 5.5% Capital Hurdle in EBA Stress Test. The largest banks in Europe will have to show their capital won’t dip below 5.5 percent of their assets in an economic crisis, the European Union’s top banking regulator said. The exercise, which will examine a sample of 124 banks that cover more than half of each EU member state’s banking industry, is scheduled to begin around the end of May, the European Banking Authority said in a statement today. Results will be published at the end of October.

• European Stocks Drop, Posting Their Worst January in Four Years. European stocks fell, posting their worst start to the year since 2010, as companies from Electrolux AB to Vedanta Resources Plc dropped after reporting results. Electrolux slid the most since August 2011 after earnings missed analysts’ estimates. Vedanta Resources Plc lost 3.6 percent after saying copper output in Zambia, Australia and India declined. LVMH Moet Hennessy Louis Vuitton SA jumped 7.9 percent after reporting growth in fashion and leather-goods sales rebounded in the fourth quarter. The Stoxx Europe 600 Index slipped 0.3 percent to 322.52 at the close of trading, paring earlier losses of as much as 1.7 percent. 

• WTI Oil Falls From 2014 High on Emerging Economies. WTI for March delivery fell 57 cents, or 0.6 percent, to $97.66 a barrel at 2:19 p.m. on the New York Mercantile Exchange. WTI climbed 0.9 percent to $98.23 yesterday, the highest settlement since Dec. 31. The volume of all contracts traded was 13 percent above the 100-day average. Futures are up 1.2 percent this week and down 0.8 percent this month. 

• Copper Caps Longest Losing Streak Since 1998 on China Concern. Copper for delivery in three months lost 0.4 percent to settle at $7,065 a ton ($3.20 a pound) at 5:50 p.m. on the London Metal Exchange. This month’s decline was the biggest since June.

• House Republicans’ Economic Agenda Targets Middle Class. U.S. House Republican leaders are preparing an economic agenda that includes energy proposals aimed at lowering utility bills and countering President Barack Obama’s focus on income inequality, according to a document obtained by Bloomberg News. 

CNBC:

• IMF calls for ‘urgent action’ amid EM crisis. (video) The International Monetary Fund (IMF) has responded to the ongoing volatility in emerging markets by stressing the need for coherent macroeconomic policies and urgent policy action in some countries. Emerging markets have been hit over the past week amid concerns that growth in the region will slow as the U.S. Federal Reserve tightens its monetary policy, draining global liquidity. A number of emerging market currencies have seen major falls against the dollar, with some central banks forced to raise rates and intervene in the markets to limit the swings.

• 4 signs of a potential ETF apocalypse now.

• A hard landing in China: The risks in one graphic.

• Chinese wealthy pull back on luxury spending. (video)

• Cashin: We're getting 'awfully close' to end of bull market.

ZeroHedge: 

• Real Disposable Income Plummets Most In 40 Years. (graph)

• Alternative Asset Managers Fueling Credit Bubble, US Regulator Warns.

• Chicago PMI 59.6 Beats Despite Decline: Employment Drops Most Since April. (graph)

• Greece Is Back: Germany, France, Creditors Hold Secret Meeting Due To Greek Bailout "Mounting Concerns".

• Spain's Banco Popular Bad Loans Surge 20% QoQ (Most Ever) To Record High. (graph)

• How To Trade The Emerging Market Meltdown.

• Third Banker, Former Fed Member, "Found Dead" Inside A Week.

• A Not So Subtle Hint That Argentina May Be Un-Fixed. (graph)

Business Insider: 

• America's Shopping Malls Are Dying A Slow, Ugly Death. 

• Jon Stewart Laughs At Nancy Pelosi When She Says She Doesn't Know Why The Obamacare Website Failed.

Futures Magazine:

• Emerging markets feel screws beginning to tighten. Thanks to the Fed's tapering, a wider public is becoming aware of currency instability in diverse economies, from Turkey to Argentina, and India to Indonesia.

Reuters: 

• Emerging-market drop hasn't hurt U.S. prospects -Fed's Williams. The recent drop in emerging markets and U.S. stocks has not hurt the growing momentum of the U.S. economy or its labor market, a top Federal Reserve official said on Friday, adding the Fed should not focus too much on "short-term developments." 

• MasterCard(MA) 2014 revenue to come in at low end of forecast. MasterCard Inc posted a lower-than-expected quarterly profit and said its net revenue for the year would come in at the low end of its three-year forecast range as customers migrate to Visa Inc as part of a previously announced deal. 

• Fed's George warns of risks from super-easy monetary policy. The Federal Reserve's decision to ratchet down its massive bond-buying program was a "modest but positive step," a top Fed official said on Friday, but continued super-easy monetary policies pose risks both at home and abroad. 

• Emerging market stock funds worldwide post $6.4 bln outflow -BofA.

Financial Times:

• Economic danger lurks in China’s shadow banks. Of all the economic dangers to flare up over the past week, the most unsettling was at first glance also the most esoteric: the near default of a high-yield loan product held by a few hundred small-time Chinese investors. First, the direct risks. Credit Equals Gold No. 1 is just one of a wave of Chinese shadow banking products that will fail to live up to their outlandishly confident names when they mature this year. The drama over repayment will be played out again and again.

Telegraph:

• Argentina is no danger to the world - but the eurozone is. Emerging markets are making headlines as they jack up interest rates to defend their currencies, but it is the eurozone that is still in a really bad way.

Taipei Times:

• China reportedly mulling S China Sea defense zone. ‘ASAHI’ REPORT:The Japanese newspaper said the Chinese air force drafted proposals for the zone, and submitted them to senior officials in May last year.